Soaring lithium carbonate prices make financing difficult -Lithium - Ion Battery Equipment
In 2016 and 2017, the ASX-listed mining company AlturaMining (ASX: AJM) successively signed binding agreements with Lionergy Co., Ltd. (a large-scale lithium metal and battery material manufacturer in China) and my country's Shaanxi battery manufacturer Jianrui Wineng Co., Ltd. Sexual order contracts, the contracted quantities are all at the level of 100,000 tons.
Lithium prices have tripled since 2015. Lithium carbonate prices rose to record highs in May in all markets except Asia, according to Benchmark Mineral Intelligence. In South America, the world's second-largest lithium producer, lithium prices rose 6.8 percent to $15,750 a tonne in May.(Lithium - Ion Battery Equipment)
Not only the "Dongfeng" of rising lithium prices, but also the signing of a large order from the world's largest electric vehicle market - my country's battery manufacturer, Altura should be favored by banks, but the reality is more than Altura CEO James Brown expected. Grim.
According to Bloomberg, James Brown made numerous calls to banks and various institutions to raise funds last Christmas. Finally, Minneapolis-based private equity firm CastlelakeLp helped arrange a $110 million financing. But there's a catch: The funds carry a whopping 15 percent interest rate, nearly double what banks typically charge mining companies.
Brown previously worked for Australian coal producer New Hope for 22 years. "We've been trying to reach out to the banks we've been working with for years," he said. "They said: 'Guys, we like the lithium business, but we're not desperate for it. If you come to us with coal, gold or iron ore, You don't have to worry."
Altura expects to sell its first lithium concentrates early this month, but will need new funding to replace existing ones.
According to the latest forecast from analysts at Bank of America Merrill Lynch, lithium producers may have up to 815,000 tons of new production in production by 2025, but market demand may only increase by 460,000 tons. Given that almost every lithium producer in the market is looking to add production, the likelihood of a drop in lithium prices in the future is high. Morgan Stanley and Citigroup made similar predictions.
Oversupply is perhaps the biggest reason for banks to be cautious. They will also point to the poor track record of some lithium miners in developing early-stage projects and a lack of judgment in small, opaque markets.
Altura's "cold reception" is not unique. Lithium miner Nemaska Lithium Inc. has spent 18 months completing a C$1.1 billion ($830 million) financing plan for a mine and processing plant in Quebec. The company's chief executive, Guy Bourassa, said battery makers and automakers "have absolutely no idea how long it will take for mining projects to be operational." "It's going to be a big problem, it's going to be a barrier to new supply," he said.
Perth-based Azure Capital Ltd. has advised lithium mining companies on financing. It usually takes two years to set up a lithium project and five years to repay the project loan, said Simonprice, a partner and co-founder of the firm. That means lenders need to be confident about the market outlook for the next seven years.
Brisbane-based Orocobre chief executive Rid Seville said the lack of access to traditional financing was a drag on the industry. The company started selling lithium from northern Argentina in 2015, but has struggled to ramp up production. Because these projects are not easy, "banks simply don't want to touch them."
Part of the problem is that lenders are wary of the risk of another commodity plunging, Commonwealth Bank of Australia (CBA) said in a report last August. ANZ has so far not provided loans for any lithium projects.
While the amount raised by lithium miners, including loans and bonds, rose to about $255 billion in 2017, about $13 billion in project financing last year was more than 70 percent lower than in 2014, according to data compiled by Bloomberg. So far this year, lithium project financing has amounted to about $6.1 billion.
Some lithium miners are looking to alternative sources of funding, including hedge funds or credit funds. These funds cost more. The largest lithium miner is also gearing up for a lightning IPO, in part to raise funds.
Lithium mining customers began to participate in the fundraising of lithium mining companies. South Korean steel maker Posco, which is vigorously developing its battery-making business, and Great Wall Motors, my country's largest SUV maker, have invested in Pilbara Minerals to speed up project development. TSLA (TeslaInc.) signed a supply agreement with Kidman Resources (ASX:KDR) in May for a six-year contract.
Lithium prices have tripled since 2015. Lithium carbonate prices rose to record highs in May in all markets except Asia, according to Benchmark Mineral Intelligence. In South America, the world's second-largest lithium producer, lithium prices rose 6.8 percent to $15,750 a tonne in May.(Lithium - Ion Battery Equipment)
Not only the "Dongfeng" of rising lithium prices, but also the signing of a large order from the world's largest electric vehicle market - my country's battery manufacturer, Altura should be favored by banks, but the reality is more than Altura CEO James Brown expected. Grim.
According to Bloomberg, James Brown made numerous calls to banks and various institutions to raise funds last Christmas. Finally, Minneapolis-based private equity firm CastlelakeLp helped arrange a $110 million financing. But there's a catch: The funds carry a whopping 15 percent interest rate, nearly double what banks typically charge mining companies.
Brown previously worked for Australian coal producer New Hope for 22 years. "We've been trying to reach out to the banks we've been working with for years," he said. "They said: 'Guys, we like the lithium business, but we're not desperate for it. If you come to us with coal, gold or iron ore, You don't have to worry."
Altura expects to sell its first lithium concentrates early this month, but will need new funding to replace existing ones.
According to the latest forecast from analysts at Bank of America Merrill Lynch, lithium producers may have up to 815,000 tons of new production in production by 2025, but market demand may only increase by 460,000 tons. Given that almost every lithium producer in the market is looking to add production, the likelihood of a drop in lithium prices in the future is high. Morgan Stanley and Citigroup made similar predictions.
Oversupply is perhaps the biggest reason for banks to be cautious. They will also point to the poor track record of some lithium miners in developing early-stage projects and a lack of judgment in small, opaque markets.
Altura's "cold reception" is not unique. Lithium miner Nemaska Lithium Inc. has spent 18 months completing a C$1.1 billion ($830 million) financing plan for a mine and processing plant in Quebec. The company's chief executive, Guy Bourassa, said battery makers and automakers "have absolutely no idea how long it will take for mining projects to be operational." "It's going to be a big problem, it's going to be a barrier to new supply," he said.
Perth-based Azure Capital Ltd. has advised lithium mining companies on financing. It usually takes two years to set up a lithium project and five years to repay the project loan, said Simonprice, a partner and co-founder of the firm. That means lenders need to be confident about the market outlook for the next seven years.
Brisbane-based Orocobre chief executive Rid Seville said the lack of access to traditional financing was a drag on the industry. The company started selling lithium from northern Argentina in 2015, but has struggled to ramp up production. Because these projects are not easy, "banks simply don't want to touch them."
Part of the problem is that lenders are wary of the risk of another commodity plunging, Commonwealth Bank of Australia (CBA) said in a report last August. ANZ has so far not provided loans for any lithium projects.
While the amount raised by lithium miners, including loans and bonds, rose to about $255 billion in 2017, about $13 billion in project financing last year was more than 70 percent lower than in 2014, according to data compiled by Bloomberg. So far this year, lithium project financing has amounted to about $6.1 billion.
Some lithium miners are looking to alternative sources of funding, including hedge funds or credit funds. These funds cost more. The largest lithium miner is also gearing up for a lightning IPO, in part to raise funds.
Lithium mining customers began to participate in the fundraising of lithium mining companies. South Korean steel maker Posco, which is vigorously developing its battery-making business, and Great Wall Motors, my country's largest SUV maker, have invested in Pilbara Minerals to speed up project development. TSLA (TeslaInc.) signed a supply agreement with Kidman Resources (ASX:KDR) in May for a six-year contract.
